[Marxism] re: Elections in Mexico

Marvin Gandall marvgandall at videotron.ca
Sat Jul 1 15:13:11 MDT 2006

Fred Feldman wrote:

I was glad to see Julio Huato's very thoughtful comments about the
Obrador campaign in Mexico.  It confirms my sense that we are dealing
with a serious division, rooted in the masses but extending in response
to them into the ruling classes, whom Obrador basically defends.  That
is, Obrador -- more openly and determinedly than Cardenas minor's
presidential campaigns, represents a proposal to change an increasingly
intolerable status quo.

What he raises about the US ruling class suggests divisions in that
class not only about Mexico, but about United States.  After all,
Mexico, Bolivia, Argentina, Brazil, Bolivia, et al.  are NOT  the only
countries in the Americas where the rich have grown richer and the poor
have grown poorer, where  "neoliberalism" has gone wild, and where the
"threat" of "populism" to disrupt "neoliberalism" is an actual or
potential reality.

Below is a recent Financial Times article on Mexico which provides more
support for Fred's and Julio's view that the global bourgeosie is becoming
increasingly concerned about the widening inequality and deteriorating
living standards which "neoliberalism" has brought in its wake, and are
casting about for solutions to address it.

There is wide agreement, except in the most reactionary circles, that the
purchasing power of the masses needs to be augmented for political and
economic reasons - both to contain growing social unrest and to encourage
the development of a home market. So they see in the "populism" of Obrador
and others the same thing that the more enlightened wing of the US
bourgeosie saw in FDR and the New Deal, and are hoping for the same outcome.

With, I would say, an important twist - which is is apparent in the FT
article which follows. No longer are job creation measures, wage increases
(including indirectly through labor law reform), and new or improved social
benefits seen by the bourgeoisie to be necessary evils to raise living
standards in certain conditions. Now the favoured ruling class means of
injecting economic stimulus and dampening protest is through the abundant
provision of credit to the masses - notably, through mortgage money to allow
workers to purchase and borrow against their own homes, small business
loans, and ubiquitous plastic debt like Visa and Mastercard to pay for
essential goods and services. At one time, the banks would not incur the
risk of loaning to the poor, but the advent of derivatives like mortgage
backed securities (MBS's) has made mass access to credit possible by
allowing financial institutions to offload their risk by "securitizing" and
distributing their loan portfolio to investors.

As Fred notes, what is happening in Latin America is applicable to the US.
In fact, the use of debt to support living standards has been pioneered in
the US and, IMO, is one of the major reasons why the massively debt-strapped
US working class has not responded in the traditional collective way to the
deterioration of their pay and benefit standards. (The other is the opening
up of a global pool of cheap labour). For the bourgeoisie, tethering an
atomized working class to a debt treadmill is a far more secure and
profitable means of compensating for underconsumption than allowing workers'
organizations some latitude to fight for improvements to their members'

It's clear from the article that this is the course which the Mexican
bourgeoisie will press on a new Obrador administration if there is one. So
will Wall Street, which senses financing and investment opportunities south
of the border if there is a vast expansion of credit. So will an increasing
number of US pundits who argue that the best way to staunch the flow of
Mexican immigration is to encourage improvement of the country's living

*    *    *

Peso power brings hope to poor
By Richard Lapper and Adam Thomson
Finnacial Times
June 29 2006

Every weekend Hilario Amador makes the short journey to the city centre of
Zacatecas where he deposits 120 pesos with Patrimonio Hoy, a self-help
building scheme run by Cemex, Mexico's largest cement company.

The money is equal to about 20 per cent of his weekly wage at a local
abattoir and it has allowed the 38-year-old to receive regular supplies of
the materials he needs to tile the floor, repair the roof and build two
extra rooms at his modest single-storey.

"I just wouldn't have had the money to buy all the materials at one go,"
says Mr Amador, who has now set his sights on buying land and building a
bigger place.

The company offers credit and technical advice but this is no act of
altruism. The scheme makes business sense because it allows Cemex to expand
its market - and secure a reputation for reliability - among poorer

Mr Amador may scarcely be aware of it, but he is in the vanguard of a new
approach to tackling social exclusion, one pioneered by companies in the
vast underdeveloped markets of South Asia but only now surfacing in Latin
America. The notion entered the business-school mainstream courtesy of C.K.
Prahalad, an Indian academic, and his book The Fortune at the Bottom of the

The idea is simple: empower poor people economically, through credit from
companies or microfinance from lending institutions. It marks a recognition
by policymakers and businesses that only if the poor are given a stake in
the capitalist system can the region's leftward drift be halted.

That task has been rendered more pressing by the success of President Hugo
Chávez's free-spending social policies and radical nationalism in Venezuela
and the spread of such policies to other countries in the region.
Developments such as the recent gas nationalisation by Bolivia, Mr Chávez's
strongest ally in the region, and the powerful electoral showing of Ollanta
Humala, another Chávez ally, in Peru last month have heightened the urgency
of infusing a stronger social element into the agenda of market
liberalisation and democracy that guided the region in the 1990s.

So has the rise of leftwingers such as Andrés Manuel López Obrador,
front-runner in Sunday's Mexican presidential election, and the likelihood
that elections later this year in Nicaragua and Ecuador will also see
radicals in the ascendent.

Even the administration of US President George W.?Bush has conceded the need
for what Tom Shannon, its chief policymaker in the region, described as
"sober second thoughts" about the Washington Consensus: the idea long
cherished by policymakers that free-market economic reforms would prove a
panacea for regional instability.

The new approach is on display at the Washington-based multilateral
institutions and in particular at the Inter-American Development Bank, the
region's most important development organisation. This month Luis Alberto
Moreno, a former Colombian ambassador to the US who was elected president of
the bank last year with Washington's backing, announced plans to triple the
sums devoted to microfinance and to water and sewerage provision in poor

The bank has pledged to popularise "bottom of the pyramid" initiatives, such
as that of Cemex, that it sees as offering an attractive market-friendly
alternative to a Venezuelan-style, state-centred approach.

"Social gaps have to be closed," says Mr Moreno. "Governments have done well
with certain things but three years of good economic growth doesn't mean
anything for the poor in places like Bolivia. The vast majority of people
are still waiting for the promised fruits of development."

Mexico is an important testing ground for the new approach. In part that is
because the country has had some limited success at blending market-oriented
policies with social reforms. The government's cost-effective social
assistance programme, called Oportunidades, benefits about 5m families and
is gaining support among Washington policymakers.

Nearly a decade of consistent fiscal and monetary policy - coupled with
steadily rising inflows of capital resulting from the 1994 trade agreement
with the US - has paid off. Inflation is at its lowest level since the
1960s. Last year it was even lower than that of the US.

Stability has paved the way for the development of a mortgage market. In the
past two to three years, banks and housing agencies have begun to lend money
for domestic mortgages. Even the less well-off are starting to reap the
rewards. Mexicans who earn as little as $600 a month can now take out
fixed-rate loans in pesos repayable over 25 years.

The country has also provided a predictable environment for companies that
identify burgeoning opportunities to do business with the poor. Take Banco
Azteca. Formed by the Elektra retail store four years ago, it focuses on
those Mexicans who had been ignored by traditional banks in the belief that
they neither earned much nor had  savings.

Banco Azteca now has more than 6m customer accounts and has issued 1.7m
credit cards in less than a year. "For these people the difference is having
a bed, a refrigerator or a washing machine," says Luis Niño de Rivera, a
director of the bank. "Imagine the changes in their lives."

Mexico is also benefiting from another trend that policymakers at the
multilaterals believe is giving greater purchasing power to the poor: money
remitted by family members who have migrated to work in the US (see box).
Cemex has even launched a scheme called Construmex, which allows migrants
living in the US to channel remittances in the form of cement and building

In any event, all this has begun to have an unmistakable sociological
impact. Economic stability and the sheer volume of remittances combined with
the decline in average family sizes have led to an impressive growth in the
middle class. According to Ernesto Cervera, an economist at GEA, a
consultancy in Mexico City, the number of families with an income of
9,000-20,000 pesos a month has doubled from 5m to 10m in the past decade.

Yet for all the potential such bottom-of-the-pyramid schemes hold, there are
at least three obvious pitfalls. The first is the sheer scale of social
marginalisation. Mr Cervera estimates that as many as 12m Mexicans - more
than a quarter of the total workforce - make their living in the
undercapitalised and unregulated informal economy. Despite the success of
social programmes, 8.6m families still live in poverty, he says.

The second is to encourage the creation and development of small- and
medium-sized businesses. The IADB says monopolies in strategic industrial
sectors are one of the main obstacles to achieving this goal.

No sector is more restrictive than telecommunications. Many Latin America
governments have not yet removed restrictions on voice-over-internet
protocol telephony. As the bank's own report puts it: "The region still lags
behind many Asian and even some African countries."

In Mexico, Carlos Slim, the telecoms magnate, has been much criticised for
taking advantage of Telmex's domination of the sector to keep prices high.
Even Cemex, for all its social innovation, has been widely accused of
abusing its market dominance.

Third, Mexico's government, like many in the region, has made only limited
progress in reducing the red tape that makes forming a small business so
difficult. Regular reports by the International Finance Corporation, the
private-sector arm of the World Bank, show Latin America to be one of the
world's worst offenders in this regard.

It would be naïve to argue that such problems will prove easy to surmount.
But Mexico's recent experience demonstrates the role bottom-of-the-pyramid
initiatives can play in improving the lives of the poor.

To make a lasting difference, and change the social and political path on
which much of the region appears to be set, they will have to be implemented
far more widely. As Mr Moreno at the IADB says: "The biggest challenge is
scale. Without that it will only be a drop in the bucket."

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